Freddie Mac Removes the Age Restriction for Asset-Based Income

Freddie Mac just made an important change that could help more buyers qualify for a mortgage, allowing assets to be used for income. In the past, Freddie Mac's asset-based qualifying rules were more restrictive. One of the biggest limitations was that certain assets could only be used when the borrower met an age requirement. That age restriction is now being removed for eligible depository accounts and securities. The updated guideline officially applies to mortgages settling on or after February 3, 2027, although we are permitted to begin using it immediately.
You No Longer Have to Be Retired to Use Assets as Income
Asset-based qualifying is often associated with retirees. Maybe someone has a large amount of money in the bank or an investment account but does not receive enough Social Security, pension or employment income to qualify for the mortgage they want. The removal of the age restriction opens the door to a much larger group of borrowers. Business owners may have substantial savings but show limited taxable income. An investor may have accumulated a significant portfolio but have income that changes from year to year. Someone may have recently sold a business or a piece of real estate and now have substantial liquid assets but very little recurring monthly income. These borrowers may be financially strong even though their tax returns or paychecks do not tell the entire story.

We Use the Assets – Remaining After the Purchase
This does not mean that we take every dollar a borrower has and divide it by a certain number of months. We first have to subtract the money being used for the transaction. That includes the down payment, closing costs, and any other required funds. Depending on the loan and the applicable guideline, additional amounts may also have to be deducted before determining the net eligible assets. The calculation is based on the borrower's eligible assets remaining after the loan closes, not the money being spent to purchase the property.

For example, assume a borrower has $800,000 in eligible assets and will use $300,000 for the down payment and closing costs. That does not leave $800,000 available for the income calculation. It leaves approximately $500,000 in remaining assets before any other required deductions or adjustments.
Under Freddie Mac's new 180-month calculation:
$500,000 divided by 180 months equals approximately $2,778 per month in qualifying income.
Previously, Freddie Mac used a 240-month factor:
$500,000 divided by 240 months equals approximately $2,083 per month.
The new calculation could provide almost $700 more in monthly qualifying income in this example.
The New 180-Month Factor Helps Too
Removing the age restriction may be the biggest change, but reducing the division factor from 240 months to 180 months is also significant. The lower division factor produces more monthly qualifying income from the same amount of eligible assets.
Freddie Mac is also establishing a minimum net eligible asset amount of $30,000 and requiring the loan to receive an Accept underwriting recommendation. 

The Assets Must Be Documented
This is not a no-documentation loan. Depository and securities accounts will generally need a 12-month history unless the account was funded from another eligible and properly documented source. Freddie Mac will also review substantial increases or decreases in the account balance. If the balance decreased by more than 20% during the previous 12 months, the account may not be eligible unless the decrease can be documented as a transfer into another qualifying account. If the balance increased by more than 20%, the eligible amount may be limited unless the additional funds can be traced to an acceptable source, such as another eligible account, a retirement distribution, the sale of a business or the sale of real estate. The lesson is simple: having the assets is important, but documenting where the money came from is just as important.

Conventional Financing Is Not the Only Option
We also offer Non-QM asset-depletion programs that can be substantially more aggressive. Our Non-QM programs may use a 60-month division factor rather than Freddie Mac's new 180-month factor.
Using the same $500,000 in remaining eligible assets:
Freddie Mac's 180-month calculation may provide approximately $2,778 per month.
A Non-QM program using a 60-month calculation may provide approximately $8,333 per month. That is a huge difference. The Non-QM option will likely have higher interest rates and has additional down-payment requirements, but it can be an excellent solution for the right borrower.
This is why we do not look at only one loan program.
We compare conventional financing with available Non-QM options and determine which program gives the borrower the best combination of qualifying income, payment, rate, down payment, and overall cost. This could be a good program in the future, especially for those people putting down less than 20%, where Non-QM doesn’t dare to roam. It’s another tool to help our clients qualify for more or get the house they want.   

Interest Rates
Rough Thursday! Good Friday and a positive week for rates.

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the 5s –
• Conventional (≤ $832,750): low 6s
• High-balance: mid to high 6s
• Jumbo: Mid 6s
• Bridge Loans 7.75-7.99

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Buydowns Available (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money
• Construction Loans
• 203K loans
• Commercial Loans
• Fix and Flip Loans

Rates subject to change without notice.

Condo Update
Good news:

• Arroyo West is off the naughty list! YAY!
• Stratford Collection – Valencia

Bad news:

•  Los Olivos HOA 15400 La Mirada Blvd La Mirada, CA 90638
• Harbor Village HOA condominium complex, located in Ventura's Pierpont Beach area. 2511 E Harbor Boulevard

We love your Non-Warrantable Condo loans!
Need help checking a condo? Call me, and we can look it up in real time.

Also:

Full California "naughty list" available here:

https://mikemeena.com/non-warrantable-condos/

Let's Connect

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📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,